Case 5:17-cv-02287 Document 2 Filed 11/14/17 Page 1 of 28 Page ID #:2

1 Alexander M. Schack, Esq., (SBN 99126) Natasha N. Serino, Esq., (SBN 284711) 2 LAW OFFICES OF ALEXANDER M. SCHACK 3 16870 West Bernardo Drive, Suite 400 San Diego, California 92127 4 Telephone: (858) 485-6535 5 Facsimile: (858) 485-0608 [email protected] 6 [email protected] 7 Attorneys for Plaintiffs Melissa Atkinson, et al. 8 9 IN THE UNITED STATES DISTRICT COURT 10 FOR THE CENTRAL DISTRICT OF CALIFORNIA 11 ) Case No.: 12 MELISSA ATKINSON, an individual, for ) herself and all others similarly situated, ) CLASS ACTION COMPLAINT 13 ) Plaintiffs, ) 14 ) JURY TRIAL DEMANDED vs. ) 15 ) ) 16 LLR, INC., a Wyoming Corporation; ) LULAROE, LLC d/b/a LULAROE; a ) 17 California limited liability corporation; and ) Does 1 through 100, inclusive, ) 18 ) ) 19 Defendant(s). 20 21 Plaintiff Melissa Atkinson (“Plaintiff”), individually and on behalf of all others 22 23 similarly situated (the “Class”), by and through her attorneys, files this Class Action 24 Complaint against LLR, Inc., LuLaRoe, LLC, and DOES 1 through 100 (collectively 25 “Defendants”). 26 27

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1 INTRODUCTION 2

3 1. This is an action on behalf of Plaintiff Melissa Atkinson (hereinafter 4 “Plaintiff, for herself and all those similarly situated, to recover damages caused by 5 Defendant’s operation of a fraudulent pyramid scheme and endless chain scheme. As 6 alleged herein, the scheme is fraudulent because it requires the payment by participants of money to Defendants LuLaRoe, LLC and LLR, Inc. (collectively 7 “LuLaRoe”) and their co-conspirators, in return for which participants receive (1) the 8 right to sell products and (2) the right to receive, in return for recruiting other 9 participants into the program, rewards which are unrelated to the sale of the product 10 to ultimate users. 11 2. This action is brought on behalf of a class of persons who serve or have 12 served as Independent Fashion Retailers for LuLaRoe. 13 3. As a result of Defendants’ deceptive acts, practices, and representations, 14 and its operation of the illegal scheme alleged herein, Plaintiff and the Class members 15 defined below have suffered harm in that they lost money or property to become 16 participants (i.e. Independent Fashion Retailers for LuLaRoe) and to purchase 17 inventory. Plaintiff therefore brings this action seeking relief on behalf of herself and 18 all others similarly situated. 19 PARTIES 20 4. Plaintiff Melissa Atkinson is a California citizen who resides in San 21 Diego County, California. Plaintiff was recruited to be an Independent Fashion 22 Retailer for LuLaRoe and unknowingly became a participant of their fraudulent 23 pyramid scheme. 24 5. Defendant LuLaRoe, LLC d/b/a LuLaRoe is a California limited liability 25 company with its principal place of business at 1375 Sampson Avenue, Corona, CA 26 92879. Defendant LuLaRoe, LLC is doing business in the State of California. 27 6. Defendant LLR, Inc. is a Wyoming corporation with its principal place 28 of business at 416 Double Eagle Ranch Road, Thayne, WY 83127. Defendant LLR,

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1 Inc.’s principal place of business in California is located at 1375 Sampson Avenue, 2 Corona, CA 92879. 3 7. The true names, roles and/or capacities of Defendants named as DOES 1 4 through 100, inclusive, are currently unknown to Plaintiff, who therefore names and 5 sues such Defendants under fictitious names. Plaintiff will identify their true 6 identities and their involvement if and when that information becomes known. 7 Plaintiff is informed and believes and thereon alleges that each of the fictitiously named defendants is responsible in some manner for the occurrences and damages 8 alleged herein. 9 8. Plaintiff is informed and believes and thereon alleges that, at all times 10 mentioned, each defendant, including DOES 1 through 100, was the agent, 11 representative, alter ego, successor-in-interest, affiliate, principal, partner, joint 12 venture, and/or employee of the other defendants, and was acting within the course 13 and scope of its authority and with the express and/or implied permission, knowledge, 14 consent, and ratification of all other defendants when doing the acts and omissions 15 alleged herein. 16 9. Each of the Defendants acted as the co-conspirator, agent, joint venturer, 17 or alter ego of and/or for the other Defendants with respect to the acts, violations, and 18 common course of conduct alleged herein, and ratified said conduct, aided and 19 abetted, or is otherwise liable. Defendants have had meetings with other Defendants 20 and reached agreements to market the LuLaRoe pyramid or chain scheme as alleged 21 herein. Defendants also used interstate communication methods, including mail, 22 telephone lines, and internet transmissions to perpetuate their unlawful activities as 23 alleged herein. 24 10. The acts charged in this Complaint, as having been done by Defendants, 25 were authorized, ordered, ratified or done by their officers, agents, employees, or representatives, while actively engaged in the management of the Defendants’ 26 business or affairs. 27 JURISDICTION AND VENUE 28

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1 11. This Court has jurisdiction over this action pursuant to the Class Action 2 Fairness Act of 2005, 28 U.S.C. § 1332(d). Plaintiff alleges that the amount in 3 controversy exceeds $5,000,000, exclusive of interest and costs. Plaintiff further 4 alleges that members of the proposed Class are citizens of a state different from that 5 of LLR, Inc., and that the proposed Class includes in excess of 100 members. 6 12. This Court has personal jurisdiction over LuLaRoe because LuLaRoe 7 regularly conducts business in California and has marketed and sold inventory in California and recruited participants for its illegal pyramid scheme in California. 8 LuLaRoe therefore has sufficient minimum contacts with this State to render the 9 exercise of jurisdiction by this Court in compliance with traditional notions of fair 10 play and substantial justice. 11 13. Venue is proper in this District pursuant to 28 U.S.C. § 1391 because 12 Defendants transact a substantial amount of business in this District and because a 13 substantial part of the events or omissions giving rise to Plaintiff’s claims occurred in 14 or emanated from this District 15 FACTUAL ALLEGATIONS 16 A. The Nature of Pyramid Schemes 17 14. While pyramid schemes can take different forms, they are at their core 18 inherently illegal schemes by which their perpetrators induce others to join the 19 scheme with the promise of high profits and rewards from a putative business. The 20 reality of the schemes, however is that rewards to those that join come almost 21 exclusively from the recruitment of new participant victims of the scheme. 22 15. “Pyramid schemes are said to be inherently fraudulent because they must 23 eventually collapse.” Webster v. Omnitrition International, Inc., 79 F.3d 776, 781 24 [citing S.E.C. v. International Loan Network, Inc., 968 F.2d 1304, 1309 25 (D.C.Cir.1992). “Like chain letters, pyramid schemes may make money for those at 26 the top of the chain or pyramid, but “must end up disappointing those at the bottom 27 who can find no recruits.” (Id. [citing In re Koscot Interplanetary, Inc., 86 F.T.C. 28 1106, 1181, aff’d mem. sub nom.].

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1 16. Per the Federal Trade Commission’s established test for assessing what 2 constitutes a pyramid scheme, pyramid schemes “are characterized by the payment by 3 participants of money to the company in return for which they receive (1) the right to 4 sell a product and (2) the right to receive in return for recruiting other participants 5 into the program rewards which are unrelated to sale of the product to ultimate 6 users.” Omnitrition, 968 F.2d at 781. 7 17. According to the Ninth Circuit, the “satisfaction of the second element of the Koscot test is the sine qua non of a pyramid scheme: “As is apparent, the 8 presence of this second element, recruitment with rewards unrelated to product sales, 9 is nothing more than an elaborate chain letter device in which individuals who pay a 10 valuable consideration with the expectation of recouping it to some degree via 11 recruitment are bound to be disappointed.” Omnitrition, 968 F.2d at 781. 12 18. The United States Court of Appeals, Ninth Circuit has adopted the 13 Koscot standard and held that the operation of a pyramid scheme constitutes fraud. 14 19. Pyramid schemes and endless chain schemes are likewise illegal under 15 California law. California Penal Code § 327 defines an endless chain scheme as 16 follows: “any scheme for the disposal or distribution of property whereby a 17 participant pays a valuable consideration for the chance to receive compensation for 18 introducing one or more additional persons into participation in the scheme or for the 19 chance to receive compensation when a person introduced by the participant 20 introduces a new participant.” This definition is similar to the Koscot test. 21 B. The LuLaRoe Pyramid Scheme’s Basic Structure 22 20. Since at least 2013, LuLaRoe has been operating and conducting 23 business in California, and throughout the United States. 24 21. Defendant LuLaRoe purports to be a lawful and legitimate company 25 engaged in “network based marketing” which it describes as “conducted through networks of independent contractors dispersed across the entire United States and 26 internationally.” 27 28

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1 22. In reality, LuLaRoe is the founder of an enterprise that is and always has 2 been an illegal pyramid scheme/endless chain scheme. This enterprise will hereinafter 3 be referred to as the “LuLaRoe Pyramid.” 4 23. The LuLaRoe Pyramid operates by offering prospective participants the 5 opportunity to become “Independent Fashion Retailers” (“IFRs”) who allegedly will 6 have the opportunity to “make between 35% to 50% of gross sales” at the lowest 7 level, “Fashion Consultant,” and are further eligible to earn “override bonuses” on the “Personal Volume (wholesale cost of items sold) of their Personally Sponsored 8 Fashion Consultants” as well as for every consultant in generations after that as 9 “Trainers,” “Coaches,” and “Mentors.” 10 24. Defendant LuLaRoe labels all individuals who participate in the 11 LuLaRoe Pyramid as “IFRs.” 12 25. The basic terms of LuLaRoe’s compensation plan are set forth in 13 LuLaRoe’s Policies and Procedures, Compensation Plan, and Leadership Bonus Plan 14 documents. 15 26. LuLaRoe utilized Policies and Procedures, Compensation Plan, and 16 Leadership Bonus Plan documents that amount to a fraudulent and illegal pyramid 17 scheme, both by its very terms and by its implementation by LuLaRoe in practice. 18 27. Prospective participants who desire to join LuLaRoe enter the company 19 as a Fashion Consultant. Fashion Consultants must “purchase an initial inventory of 20 LLR [LuLaRoe] products as specified in the LLR Independent Fashion Consultant 21 Business Overview,” which then allows them to earn money by recruiting or 22 coaching others. In 2016, the “onboarding packages” ranged in price from $4,812 for 23 336 pieces to $6,784 for 463 pieces. 24 28. After purchasing at least $4,812 in LuLaRoe inventory, a new LuLaRoe 25 Fashion Consultant then ostensibly has the opportunity to advance to the following higher positions within the company: 26 a. Sponsor 27 b. Trainer 28

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1 c. Coach 2 d. Mentor 3 29. Coaches and Mentors also have the opportunity to participate in the 4 Leadership Pool, which allows those who attend quarterly Leadership Events and the 5 annual convention to earn “2% of the Wholesale Value of all Retail Sales transacted 6 in a month” “divided by the total points earned” for three months following the event. 7 Trainers receive 1 point for qualifying as a Trainer and 1 point for each First Level Leader on their Team. Coaches and Mentors receive 2 points for qualifying as a 8 Coach, 1 point for each First Level Leader and 2 points for each Second Level Leader 9 on their Team.” 10 30. The basis of promoting IFRs to subsequent higher positions in the 11 company is not success in selling products, but rather in the recruitment and 12 sponsorship of new LuLaRoe IFRs by the sponsor, trainer, coach or mentor and those 13 in his or her “downline” (i.e. IFRs below them on the pyramid up to 3 levels). The 14 Defendants recruit people to become IFRs, entice them to purchase LuLaRoe 15 products and related marketing materials through material false statements and 16 omissions, and then distribute the proceeds of the product and services sales to new 17 recruits based almost exclusively on participants’ recruitment of new victims, rather 18 than on the sale of products to retail users. As a result of investing in this scheme, 19 Plaintiff and the Class have suffered millions of dollars in losses. 20 C. Defendants’ Enterprise Constitutes a Pyramid Scheme 21 31. Defendants have operated and promoted their fraudulent scheme through 22 the use of the United States mail and interstate wire communications. Through their 23 creation and operation of the pyramid scheme, Defendants specifically intended to, 24 and did in fact defraud the IFRs, including Plaintiff and members of the Class. 25 32. The first part of the illegal pyramid scheme consists of a multi-level marketing business run by LuLaRoe. At the bottom rung of the operation is a network 26 of IFRs. LuLaRoe purports to sell its consumer products through the IFRs, but in fact 27 few of LuLaRoe’s products are sold to anyone other than the IFRs. The prices IFRs 28

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1 pay for LuLaRoe’s products (and associated costs) are so high that any profit on retail 2 sales is virtually impossible. 3 33. In addition, Independent Fashion Retailers cannot select the specific 4 items purchased. In particular, Independent Fashion Retailers can only select the 5 types of items, but not the specific patterns and therefore cannot tailor their inventory 6 to items that would sell well to their customers. This makes it difficult, if not 7 impossible in many cases for Independent Fashion Retailers to sell many products. Furthermore, LuLaRoe’s prints and patterns are very bold and bright and many of 8 them do not appeal to customers or are simply not desirable. Despite this and as a 9 result of this, Independent Fashion Retailers are forced to purchase inventory that is 10 not sellable in order to remain eligible for other purported benefits under the 11 LuLaRoe Pyramid. Defendants’ response to this issue is to simply tell IFRs to 12 purchase more inventory so they can have additional patterns to sell. 13 34. Because the IFRs are LuLaRoe’s actual customers and consumers of its 14 products, LuLaRoe requires an ever expanding network of IFRs in order to keep 15 LuLaRoe afloat. 16 35. As alleged herein, it is very rare that Independent Fashion Retailers are 17 able to sell the inventory they purchase at a profit. Defendants also prohibit 18 Independent Fashion Retailers from selling the clothing online, whether through 19 online retail stores or through websites they create. 20 36. As a result of these issues and the structure of the policies and 21 procedures, compensation plan, and leadership bonus plan utilized by LuLaRoe, IFRs 22 are essentially able to earn compensation from two sources: (1) bonuses for recruiting 23 and sponsoring new representatives; and (2) commissions from sales of products by 24 themselves and by their recruits in their “downline.” 25 37. Defendants operate an illegal pyramid scheme because this compensation plan affords IFRs the right to receive compensation in return for 26 recruiting other participants into LuLaRoe; rewards which are unrelated to the sale of 27 products or services to ultimate users outside of LuLaRoe. See United States v. Gold, 28

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1 177 F.3d 472, 480 (6th Cir. 1999) (quoting In re Koscot Interplanetary, Inc., 86 2 F.T.C. 1106, 1187 (1975)). Such a scheme is deemed inherently fraudulent under 3 federal law. Id. 4 i. Bonuses Paid to LuLaRoe IFRs are based on recruiting others to join LuLaRoe 5 6 38. LuLaRoe’s compensation plan involves an elaborate set of bonuses 7 which are effectively the only way to earn money in LuLaRoe and which are all tied 8 not to real sales to outside customers, but rather to recruitment of new IFRs. 9 39. After hosting 10 Pop-Up Boutiques, generating a minimum of $10,000 in retail sales, and personally sponsoring at least one IFR, an IFR achieves the rank of 10 “Sponsor.” Sponsors receive an “override bonus” of “5% on the wholesale value of 11 the sales of [their] new Personally Sponsored Independent Fashion Retailer,” 12 calculated per calendar month. Sponsors “sales” need not be to actual customers but 13 rather may be purchases of LuLaRoe products made by the sponsored IFR. New IFRs 14 are required to purchase an initial inventory of LulaRoe products when they join the 15 LuLaRoe Pyramid, thus triggering the “override bonuses” to those above them on the 16 LuLaRoe Pyramid. Thus, an override bonus is compensation for recruitment and is 17 not based on actual product sales to end users outside of LuLaRoe. Furthermore, 18 bonus payments to IFRs are not based on sales to actual customers, but rather the 19 wholesale value of the IFRs’ purchases, the number of downline recruits into the 20 scheme, and the value of the downline IFRs purchases from LuLaRoe. 21 40. Additionally, an IFR may receive additional “override bonuses” of 3% 22 for any member of their team that they do not personally sponsor by achieving the 23 rank of “Trainer.” To achieve the rank of “Trainer,” an IFR must personally 24 sponsoring at least 3 IFRs, build a team of least 10 people, and achieve personal and 25 team retail sales marks as well as a per piece sold average mark. If a Team member 26 becomes a Trainer, the original Trainer receives 1% of the dollar amount of the group 27 volume as well 1 point in the Leadership Pool for the new Trainer. This structure 28

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1 provides further incentive to build a pyramid all the way through multiple levels of 2 recruitment. 3 41. Once an IFR becomes a Trainer, he or she is eligible to achieve the rank 4 of “Coach” if at least three individuals on their team become “First Level Leaders,” 5 meaning they achieve a leadership ranking themselves. Coaches must have personal 6 retail sales totaling 250 pieces with a minimum $7,500 in Retail Sales, have team 7 retail sales totaling 1,750 pieces with a minimum $52,500 in Group Retail Sales, and have a per piece sold average of at least $30 in Retail Sales, both team and personal. 8 However these requirements can be reduced if any Personally Sponsored IFR sells 9 175 pieces with a minimum of $5,000 in Retail Sales. In addition to the Trainer 10 Leadership Bonus, Coaches are eligible to earn 1% of the Wholesale Value of any 11 Second Level Leader’s Group Retail Sales as well as additional points in the 12 Leadership Pool. Coaches receive 2 points in the Leadership Pool for themselves and 13 an additional 1 point for each First Level Leader and 2 points for each Second Level 14 Leader on their Team. This structure provides incentive to encourage those downline 15 to recruit more and more participants, and further builds the pyramid through 16 multiple levels of recruitment. 17 42. Once an IFR becomes a Coach, he or she is eligible to achieve the rank 18 of “Mentor” if he or she has at least 3 Leadership Lines with Coaches or above, and 3 19 additional Leadership Lines. A Mentor must satisfy all the same requirements as a 20 Coach, and must have at least 6 Leadership Legs. At least 3 must have a Coach or 21 above in the leg. In addition to the Coach Bonus, Mentors are eligible to earn 1% of 22 the wholesale value of any Third Level Leader’s group retail sales. 23 43. Each level of “leadership” enables the IFR to collect a percentage from a 24 new level of the pyramid. This structure incentivizes IFRs to recruit an endless 25 number of participants and to encourage recruits to make the same effort to build the pyramid. 26 27 28

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1 44. Accordingly, these Sponor, Trainer, Coach, and Mentor programs 2 amount to nothing more than another means for LuLaRoe to push IFRs to recruit new 3 participants into the LuLaRoe Pyramid Scheme and to receive payment from IFRs. 4 ii. Commissions Ostensibly Earned on Sales of Products Are, In Fact, Tied to Recruitment of New Managers 5 6 45. Although LuLaRoe’s compensation structure allows IFRs to earn 7 commissions on the sale of LuLaRoe products, those commissions are relatively 8 small compared to the “override bonuses” that an IFR can earn when new IFRs are 9 recruited to join LuLaRoe in his or her downline. 46. Even this commission structure rewards recruitment, not sales to 10 customers outside the LuLaRoe Pyramid, because IFRs are encouraged to purchase 11 LuLaRoe products themselves via inventory loading and discouraged or prohibited 12 from measures that would enable sales to customers outside the LuLaRoe Pyramid 13 (i.e. setting up a website to sell clothing). 14 47. LuLaRoe’s commission structure makes this possible by allowing IFRs 15 to earn commissions on sales without selling to customers outside the LuLaRoe 16 Pyramid. In fact, new IFRs are required to purchase an initial inventory or 17 “onboarding package,” ranging in price from $4,812 to $6,784, and therefore allow 18 bonuses to be paid to their sponsors. 19 48. LuLaRoe’s commission structure allows IFRs to earn commissions on 20 sales of products by themselves, to themselves, and by those IFRs they recruit to join 21 the company for multiple levels below them on the pyramid. 22 iii. Defendants Make False Claims About Their Success and the Money that Independent Fashion Retailers Will Earn 23

24 49. Defendants led IFR’s to believe they could earn money by becoming 25 IFRs. Defendants told consumers that “in a matter of a few months, you can 26 completely repay your initial investment and have money in the bank.” 27 28

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1 50. As part of this deception, Defendants misrepresented that IFRs would be 2 able to regain their initial investment and earn money within as little as one to four 3 months. Defendants used the chart below as part of their marketing, advertising and 4 promotional materials to recruit IFRs into the LuLaRoe Pyramid. 5 6 7 8 9

10 51. Plaintiffs and the class were misinformed and manipulated to join the 11 LuLaRoe Pyramid. Potential IFRs were enticed with promises of “part time work for 12 full time pay.” However, IFRs were then required to invest in ever increasing 13 amounts of Defendants’ products, irrespective of whether they were able to sell their 14 inventory. Defendants consistently repeated the slogan “buy more sell more” and 15 assured IFRs that they would recoup their investment through recruitment and retail 16 sales. Despite this, Plaintiff and thousands of other IFRs never turned a profit. 17 Plaintiff and members of the class were tricked into Defendants’ pyramid scheme, 18 which profits only those at the top of the pyramid. 19 52. The LuLaRoe Pyramid grew at an exponential rate. LuLaRoe enticed 20 IFRs to achieve financial freedom by recruiting others to become IFRs and by having 21 IFRs purchase inventory from LuLaRoe. However, none of the IFR bonus payments 22 distributed by LuLaRoe were dependent on actual sales to consumers. Rather, they 23 were based solely on inventory purchased by IFRs within the LuLaRoe Pyramid. 24 53. Plaintiff and the Class believed Defendants representations and 25 subsequently joined the LuLaRoe Pyramid and/or continued to purchase an ever 26 increasing amount of inventory. Each spent thousands of dollars to purchase LuLaRoe products and were pressured to encourage others to do the same. 27 28

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1 54. The LuLaRoe Pyramid soon created an over saturated market, making it 2 increasingly difficult for those at the bottom of the pyramid to turn a profit. LuLaRoe 3 informed struggling IFRs that the solution to their problem was to acquire more 4 inventory. 5 55. Plaintiff and the class failed to realize any profit despite their hard work 6 and commitment. This is because they were doomed to fail from the start as a result 7 of Defendants’ unlawful pyramid scheme. The LuLaRoe Pyramid focuses on paying IFRs for recruiting and on the basis of their recruits’ inventory purchases, regardless 8 of whether recruits had any actual retail sales. This structure, which pays millions to 9 those at the top at the expense of those at the bottom of the pyramid, constitutes an 10 unlawful pyramid scheme. 11 D. The LuLaRoe Pyramid Violates the Amway Rules 12

13 56. As stated above, new IFRs are recruited into an existing “line of 14 sponsorship” to which the recruiting IFR already belongs. IFRs are recruited to 15 LuLaRoe because LuLaRoe omits to inform the IFRs that they are entering into an 16 illegal pyramid scheme/endless chain scheme, and that the overwhelming majority of 17 IFRs will lose money rather than earn it. These are material omissions. 18 57. Defendants’ scheme violates California Penal Code § 327 because it is 19 an endless chain scheme or pyramid scheme. Accordingly, even if Defendants could 20 establish compliance with the Federal Trade Commission’s (“FTC”) decision in In re Amway Corp., 93 F.TC. 618 (1979)—which they cannot—the scam nevertheless 21 violates California Penal Code § 327. 22 58. In Amway, the FTC ruled that Amway was not a pyramid scheme 23 because it adopted and enforced certain rules that were intended to avoid the 24 characteristics of a pyramid scheme. 25 59. The FTC held that a direct marketing business like Amway would not be 26 considered a pyramid scheme if the sponsor of the business did not violate the initial 27 investment rule, the 70% buyback rule, and the 10 customer rule, all of which are 28 described in more detail below. - 13 - CLASS ACTION COMPLAINT Case 5:17-cv-02287 Document 2 Filed 11/14/17 Page 14 of 28 Page ID #:15

1 60. The FTC reasoned in Amway that the company’s operations did not 2 constitute a pyramid scheme because: 3 The Amway system is based on retail sales to consumers. Respondents have avoided the abuses of pyramid schemes by (1) not having a 4 ‘headhunting’ fee; (2) making product sales a precondition to receiving 5 the performance bonus; (3) buying back excessive inventory; and (4) requiring that products be sold to consumers, Amway’s buy-back, 70% 6 and ten consumer rules deter unlawful inventory loading. Id. at 107-109. 7 61. Accordingly, if any one of these rules is not followed, then the business 8 at issue may be deemed a pyramid scheme. 9 i. The Initial Investment Rule: 10 11 62. The FTC decision noted that pyramid schemes involve a payment or 12 initial disbursement by a new participant in exchange for the right to sell products and 13 the right to receive rewards in return for recruiting other participants into the 14 program, and which are unrelated to the sale of products to the ultimate user. The 15 FTC found that Amway did not require such an investment because “the Amway 16 system does not involve an ‘investment’ inventory by a new Rep. A kit of sales 17 literature costing only $15.60 is the only requisite.” In re Amway Corp., 93 F.T.C. 18 618, [107] (1979). 19 63. LuLaRoe, however, requires a significant investment by a new IFR. Each new IFR is effectively required to make an initial investment of thousands of 20 dollars through the purchase of LuLaRoe products. As alleged herein, Fashion 21 Consultants must “purchase an initial inventory of LLR [LuLaRoe] products as 22 specified in the LLR Fashion Independent Fashion Consultant Business Overview,” 23 which then allows them to earn money by recruiting or coaching others. In 2016, the 24 “onboarding packages” ranged in price from $4,812 for 336 pieces to $6,784 for 463 25 pieces. 26 64. In Omitrition, unlike with LuLaRoe, there was no significant charge to 27 become an IFR and they had no quota of product they had to buy. However, in order 28 to receive any benefit from the system to move up to the next level as a “Bronze

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1 Supervisor,” the IRs had to purchase and convince three other recruits to purchase a 2 certain amount of product. Omnitrition at 780. Here the scheme is worse. Individuals 3 must spend thousands of dollars to initially become Independent Fashion Retailers to 4 enable them to gain any benefits at all. Then, advancement is based on the amount of 5 product they self consume and the number of persons they can recruit as IFRs to 6 likewise purchase LuLaRoe’s inventory. 7 65. In Omnitrition, the multilevel marketer argued that its business plan did not meet the first element of the Koscot test because: “it does not charge for the right 8 to sell its products at the IRS level” – but the court disagreed. Id. at 782. The court 9 explained that in order to move up within the Omnitrition pyramid scheme: 10 A participant must pay a substantial amount of money to Omnitrition in 11 the form of large monthly product orders. In exchange for these 12 purchases, the supervisor receives the right to sell the products and earn 13 compensation based on product orders made by the supervisor’s recruits. 14 This compensation is facially ‘unrelated to the sale of product to ultimate 15 users’ because it is paid based on the suggested retail price of the amount 16 ordered from Omnitrition rather than based on actual sales to consumers. 17 On its face, Omnitrition’s program appears to be a pyramid scheme. 18 Omnitrition cannot save itself simply by pointing to the fact that it 19 makes some retail sales. 20 Id. at 782 (emphasis added). LuLaRoe’s scheme is analogous, but in fact worse than 21 Omnitrition’s in that IFRs are required to make a massive initial investment and then 22 continue to purchase large volumes of product each month to be eligible for any 23 benefits. 24 ii. The 70% Rule:

25 66. In Amway, the FTC explained the 70% rule as follows: “[t]o ensure that 26 IRs do not attempt to secure the performance bonus solely on the basis of purchases, 27 Amway requires that, to receive a performance bonus, IRs must resell at least 70% of 28

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1 the products they have purchased each month…Amway enforces the 70% rule.” 2 Amway, 93 F.T.C. 618 at 72-75. 3 67. Until July 2017, LuLaRoe did not have a 70% rule, making no mention 4 of it in any of its documents. In July 2017, LuLaRoe purported to implement a sales 5 requirement, but has not enforced this rule as it continues to accept orders from IFRs 6 even though they have not satisfied the purported sales rules. 7 68. For these reasons, Defendants do not comply with the 70% rule. iii. The “Buyback” Rule: 8

9 69. In the Amway decision, the FTC described the buyback rule as follows: 10 "Amway, the Direct Rep or the sponsoring Rep will buy back any unused marketable 11 products from a Rep whose inventory is not moving or who wishes to leave the 12 business….Amway enforces the buy-back rule...." Amway, 93 F.T.C. 618 at [72-75]. 13 70. LuLaRoe’s current buyback rule does not provide for a 100% refund, 14 requires IFRs to pay for shipping, and allows LuLaRoe to determine which items 15 qualify for a refund. LuLaRoe often does not provide a refund and imposes additional fees for returns. Items that do not qualify for a refund are allegedly donated to 16 charity, and are not returned to the IFR, thus depriving the IFR of the product and 17 compensation for the product. Lastly, even if a refund is issued, IFRs are often forced 18 to wait several months to receive a refund. For these reasons, LuLaRoe’s buyback 19 policy fails to satisfy the Amway “buyback” rule, indicating that LuLaRoe is an 20 unlawful pyramid scheme. 21 71. LuLaRoe seemingly attempted to address this issue in April 2017, when 22 it promised to honor a 100% refund policy. In fact, LuLaRoe reneged on this 23 promise as further detailed below. 24 72. In April 2017, LuLaRoe promised consultants a 100% refund of the 25 wholesale amount of inventory purchased, including shipping charges, in an effort to 26 entice participants to sign up and purchase inventory. LuLaRoe promised that the 27 buyback policy would never expire and listed no conditions or exceptions. 28

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1 73. LuLaRoe promised Consultants that they could terminate their IFR 2 status at any time and return remaining inventory for a full refund, including shipping 3 costs. These representations were directly communicated to IFRs via email, training 4 seminars, and various advertisements. 5 74. IFRs were encouraged to use the buyback policy as a means to recruit 6 IFRs and entice them to order as much inventory as possible. IFRs were also 7 encouraged to max-out their credit cards and “stop paying bills to invest more in inventory.” 8 75. Despite LuLaRoe’s promises, its return and shipping policy differed 9 substantially from what it represented. IFRs were often unable to return inventory at 10 all and/or never received a refund. 11 76. Further, IFRs were informed that they were not eligible under the 12 buypack policy unless they agreed to immediately stop selling their inventory. Once 13 an IFRs cancellation was processed, they received a confirmation and were instructed 14 to wait for a Return Authorization Number (“RA” number), necessary to return 15 LuLaRoe inventory and receive return shipping labels. 16 77. However, LuLaRoe often failed to send shipping labels or “RA” 17 numbers, leaving IFRs with thousands of dollars in inventory that they could neither 18 sell nor return. 19 78. For those few that did receive return shipping labels or “RA” numbers, 20 LuLaRoe often rejected refunds, provided only partial refunds for the items, or 21 claimed that the inventory was never received. 22 79. On or about September 13, 2017, LuLaRoe announced that its buyback 23 policy would not cover shipping charges, would only refund up to 90%, and included 24 numerous exceptions. The policy set forth on September 13, 2017 was as follows: 25  The items being returned must have been personally purchased by the Independent Fashion Consultant from LLR (purchases from other 26 Independent Fashion Consultants or third parties are not subject to 27 refund); 28

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1  The items must be in Resalable condition (see Definition of “Resalable” 2 below); and  The items must have been purchased from LLR within one year prior to 3 the date of cancellation. 4 Upon receipt of a Resalable products and sales aids, the Independent Fashion 5 Consultant will be reimbursed 90% of the net cost of the original purchase price(s). Shipping and handling charges incurred by an Independent Fashion 6 Consultant when the products or sales aids were purchased, and return shipping fees, will not be refunded. If the purchases were made through a credit card, 7 the refund will be credited back to the same account. If an Independent Fashion Consultant was paid a bonus based on a product(s) that he or she 8 purchased, and such product(s) is subsequently returned for a refund, the bonus that was paid to the Independent Fashion Consultant based on that product 9 purchase will be deducted from the amount of the refund.

10 Products and sales aids shall be deemed “Resalable” if each of the following elements is satisfied: 1) they are unworn, unwashed, folded with hang tags and 11 in original packaging; 2) packaging and labeling has not been altered or damaged; 3) they are in a condition such that it is a commercially reasonable 12 practice within the trade to sell the merchandise at full price; and 4) they are returned to LLR within one year from the date of purchase. Any merchandise 13 that is clearly identified at the time of sale as nonreturnable, discontinued, or as a seasonal item, shall not be Resalable. Items that are returned that are not 14 Resalable will be donated to a charity selected by LuLaRoe and no refund or exchange will be issued. 15 16 80. As a result, Plaintiffs and the Class have suffered significant financial 17 losses. 18 81. Under this policy, IFRs are unable to return inventory, and/or after they 19 have returned inventory are subject to LuLaRoe’s determination to that items are non- 20 refundable. This determination is made solely by LuLaRoe and rejected items are 21 donated to charity, thus depriving IFRs of both the product and compensation for the 22 product. 23 iv. The Ten Customer Rule:

24 82. The "ten customer rule" approved by the FTC in Amway provided that 25 "IRs may not receive a performance bonus unless they prove a sale to each different 26 retail customers during each month….The ten customer rule is enforced by Amway 27 and the Direct IRs...." Amway, 93 F.T.C. 618 at [72-75]. The FTC added: "[p]yramid 28 sales plans based on inventory loading or headhunting fees create an incentive for

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1 recruiting rather than selling products to consumers… Amway's ten-customer rule 2 deters inventory loading by sponsoring IRs." Id at 142-147. 3 83. Until July 2017, LuLaRoe had no “ten customer” rule. In July 2017 4 LuLaRoe claimed to have implemented a minimal sales requirement for IFRs who 5 wished to qualify for bonuses. However, LuLaRoe does not enforce this rule, as it 6 will still sell inventory to IFRs who fail to meet this requirement. For these reasons, 7 LuLaRoe’s fails to satisfy the Amway “ten customer” rule, indicating that LuLaRoe is an unlawful pyramid scheme. 8 84. All of the Defendants are aware of, approve, actively encourage, 9 promote, and facilitate the systematic noncompliance with or breach of the rules that 10 purportedly protect against the operation of a pyramid scheme, as discussed in the 11 Amway FTC Order. LuLaRoe’s rules governing pyramid schemes are therefore a 12 sham. 13 CLASS ACTION ALLEGATIONS 14 15 85. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiff brings this action on behalf of herself and all others similarly situated and seeks 16 certification of the following Class: 17 All persons who were LuLaRoe Independent Fashion Retailers at any 18 time from January 1, 2013 to the present and who lost money as a result 19 of Defendants’ illegal pyramid scheme.

20 86. Excluded from the Class are: Defendants and their parent companies, 21 subsidiaries, affiliates, directors, officers, principals, controlling entities, and agents; 22 the agents, affiliates, legal representatives, heirs, attorneys at law, attorneys in fact, or 23 assignees of such persons or entities described herein; and any judges or justices 24 assigned to hear any aspect of this litigation and any members of their immediate 25 families. 26 87. Numerosity: This Class is so numerous that joinder of all members is 27 impracticable. Plaintiff is informed and believes there are likely thousands of Class 28 members who were Independent Fashion Retailers. While the precise number of class

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1 members is presently unknown to Plaintiff, this information is in the control of 2 Defendants and can be readily ascertained through discovery. 3 88. Typicality: Plaintiff’s claims are typical of the claims of the Class in 4 that Plaintiff was an Independent Fashion Retailer who was recruited to participate in 5 Defendants’ fraudulent pyramid scheme and lost money as a result, Plaintiff and the 6 members of the Class were injured by the same wrongful conduct of Defendants, and 7 the relief sought is common to all members of the Class. Plaintiff’s claims therefore arise from the same common course of conduct giving rise to the claims of other 8 Class members. 9 89. Common Questions Predominate: Numerous common questions of law 10 and fact exist as to all members of the Class, including, but not limited to: 11 a. Whether Defendants engaged in the conduct alleged herein; 12 b. Whether Defendants’ business constitutes an endless chain 13 scheme within the meaning of California Penal Code § 327; 14 c. Whether Defendants’ conduct violates consumer protection 15 statutes and other laws asserted herein including, but not limited 16 to California’s Unfair Competition Law (Cal. Bus. & Prof. Code 17 §§ 17200, et seq.) and California’s False Advertising Law (Cal. 18 Bus. & Prof. Code §§ 17500, et seq.); 19 d. Whether members of the Class are entitled to restitution as a result 20 of Defendants’ conduct and, if so, the proper measure and 21 appropriate formula to be applied in determining such restitution; 22 e. Whether members of the Plaintiff Class are entitled to other 23 equitable relief and, if so, the proper amount thereof; 24 f. Whether members of the Plaintiff Class are entitled to injunctive 25 relief as a result of Defendants’ conduct and, if so, the appropriate form of such relief. 26 90. These and other questions of law and fact are common to the Class and 27 predominate over any questions affecting Class members individually. 28

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1 91. Adequacy: Plaintiff will fairly and adequately represent the interests of 2 the Class because she was an Independent Fashion Retailer who was recruited to 3 participate in Defendants’ fraudulent scheme, she purchased inventory she otherwise 4 would not have purchased, and she has lost money as a result of Defendants’ conduct. 5 Plaintiff has no irreconcilable conflict with any members of the Class. Furthermore, 6 Plaintiff has retained counsel with substantial experience and success in the 7 prosecution of class actions generally, and litigation of this nature specifically. 92. Superiority and Manageability: A class action is superior to any other 8 available method for the fair and efficient group-wide adjudication of this 9 controversy since individual joinder of all Class members is impracticable. 10 Furthermore, the expenses and burden of individual litigation would make it difficult 11 or impossible for individual Class members to redress the wrongs done to them, 12 especially given that the damages or injuries suffered by each individual Class 13 member may be relatively small. Even if the Class members could afford 14 individualized litigation, the cost to the court system would be substantial and 15 individual actions would also present the potential for inconsistent or contradictory 16 judgments. By contrast, a class action presents fewer management difficulties and 17 provides the benefits of a single adjudication and comprehensive supervision by a 18 single court and is manageable based on the use of common evidence and a core 19 number of representations and omissions of material fact at issue. 20 FIRST CAUSE OF ACTION ENDLESS CHAIN SCHEME 21 Cal. Penal Code § 327 and California Civil Code § 1689.2 22 (Against Defendant on Behalf of All Class Members)

23 93. Plaintiff incorporates and re-alleges by reference all allegations set forth 24 in this Complaint as though fully set forth herein. 25 94. At all times relevant hereto, Defendants have operated and continue to 26 operate an illegal pyramid scheme and endless chain scheme. 27 95. California Penal Code § 327 provides that “an “endless chain” means 28 any scheme for the disposal or distribution of property whereby a participant pays a

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1 valuable consideration for the chance to receive compensation for introducing one or 2 more additional persons into participation in the scheme or for the chance to receive 3 compensation when a person introduced by the participant introduces a new 4 participant.” 5 96. Pursuant to California Penal Code § 327, endless chain schemes are 6 illegal. In addition, California Civil Code § 1689.2 provides that a participant of an 7 endless chain scheme “may rescind the contract upon which the scheme is based, and may recover all consideration paid pursuant to the scheme, less any amounts paid or 8 consideration provided to the participant pursuant to the scheme. 9 97. As a direct and proximate result of Defendants’ conduct, including their 10 operation of an endless chain scheme, Plaintiff and the Class members have lost 11 money or property and suffered an injury in fact. 12 98. Pursuant to California Civil Code § 1689.2, Plaintiff and Class members 13 are entitled to recover all consideration paid pursuant to the scheme, less any amounts 14 paid or consideration provided to said participant(s) under the scheme. In addition, 15 Plaintiff and the Class are entitled to rescind the contract upon which the endless 16 scheme is based, and to recover reasonable attorneys’ fees. 17 SECOND CAUSE OF ACTION 18 VIOLATION OF CALIFORNIA UNFAIR COMPETITION LAW Cal. Bus. & Prof. Code §§ 17200, et seq. 19 (Against Defendant on Behalf of All Class Members) 20 99. Plaintiff incorporates and re-alleges by reference all allegations set forth 21 in this Complaint as though fully set forth herein. 22 100. California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 23 17200, et seq., proscribes acts of unfair competition, including “any unlawful, unfair 24 or fraudulent business act or practice and unfair, deceptive, untrue or misleading 25 advertising...” 26 101. Beginning at an exact date unknown to Plaintiff but at least since 27 sometime beginning in 2012, Defendants committed and continue to commit acts of 28 unfair competition as defined by the UCL.

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1 102. As specifically alleged herein, Defendants’ acts and practices violate 2 California Penal Code § 327 and the California False Advertising Law, Cal. Bus. & 3 Prof. Code § 17500, et seq., and consequently constitute “unlawful” business acts and 4 practices within the meaning of Cal. Bus. & Prof. Code § 17200. 5 103. Defendants’ acts and practices also constitute “unfair” business acts and 6 practices within the meaning of the UCL in that: (i) they violated the policy and spirit 7 of such laws; (ii) they were immoral, unethical, oppressive, unscrupulous and substantially injurious to consumers; (iii) they harmed consumers in a manner that 8 substantially outweighs any legitimate benefits of Defendant’s conduct; and (iv) the 9 injury was not one that consumers reasonably could have avoided. 10 104. Defendants’ conduct, as described herein, was and is in violation of the 11 UCL, including but not limited to the “fraudulent” or deceptive prong of the UCL. 12 Defendant’s conduct violates the UCL in at least the following ways: 13 105. Misrepresenting the amount of money that Independent Fashion 14 Retailers would earn; 15 106. Misrepresenting the ability of Independent Fashion Retailers to return 16 unsold or defective inventory; 17 107. Failing to disclose to consumers and Independent Fashion Retailers that 18 they were entering into an unlawful pyramid scheme or endless chain; and 19 108. Misrepresenting or failing to disclose that Independent Fashion Retailers 20 would need to self-consume products and convince others to do the same in order to 21 earn the promised revenue; 22 109. Defendants’ acts and practices were likely to deceive and/or did deceive 23 Plaintiff, Class members, and the consuming public and consequently constituted 24 “fraudulent” acts and practices within the meaning of the UCL. Through the untrue 25 and misleading statements contained in Defendants’ advertising, marketing, promotional materials, and other documents/materials directed to Plaintiff and the 26 Class members, Defendants misled Plaintiff, the Class members, and members of the 27 general public about the nature of its business (which is a pyramid scheme), about 28

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1 their ability to sell product, recoup their investment(s) and earn money, and their 2 ability to return products, among other things. 3 110. Defendants’ marketing, advertising and promotion of the fraudulent 4 pyramid scheme and endless chain scheme also constitutes unfair, deceptive, untrue 5 and misleading advertising. As alleged herein, Defendants’ advertising, marketing, 6 and other promotional materials contained claims, statements, omissions and 7 representations that were false, misleading and/or likely to deceive the public targeted by such materials. Defendants used such marketing, advertising and promotional 8 materials to induce consumers to join the pyramid scheme and/or endless chain and to 9 purchase their products. 10 111. Defendants’ representations and omissions alleged herein were a 11 substantial factor in Plaintiff and other Class members making their decisions to 12 become Independent Fashion Retailers and purchase inventory from Defendants at 13 the prices they did. Absent Defendants’ representations and omissions, Plaintiff and 14 the other Class members would not have purchased the inventory they did and would 15 not have signed up to be Independent Fashion Retailers with LuLaRoe. 16 112. As a direct and proximate result of Defendants’ conduct, Defendants 17 received ill-gotten gains and have been unjustly enriched at the expense of Plaintiff 18 and the Class members. 19 113. Plaintiff requests that this Court enter such orders or judgments as may 20 be necessary to enjoin Defendants from continuing its unfair, unlawful and/or 21 deceptive practices and to restore to Plaintiff and members of the Class any money 22 Defendants may have acquired by such acts of unfair competition, including 23 restitution and/or restitutionary disgorgement, as provided in Cal. Bus. § Prof. Code § 24 17203, and for such other relief set forth herein or as the Court deems appropriate. 25 THIRD CAUSE OF ACTION VIOLATION OF CALIFORNIA’S FALSE ADVERTISING LAW 26 Cal. Bus. & Prof. Code §§ 17500, et seq. 27 (Against Defendant on Behalf of All Class Members)

28

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1 114. Plaintiff incorporates and re-alleges by reference all allegations set forth 2 in this Complaint as though fully set forth herein. 3 115. At all times relevant hereto, Defendants were and are “persons” as 4 defined by Cal. Bus. & Prof. Code § 17506. 5 116. California Bus. & Prof. Code § 17500 states: “It is unlawful for any 6 person, firm, corporation or association, or an employee thereof with intent directly 7 or indirectly to dispose of real or personal property … or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or 8 disseminated before the public in this state, or to make or disseminate or cause to be 9 made or disseminated from this state before the public in any state, in any newspaper 10 or other publication, or any advertising device, or by public outcry or proclamation, 11 or in any other manner or means whatever, including over the Internet, any statement, 12 concerning that real or personal property or those services, professional or otherwise, 13 or concerning any circumstances or matter of fact connected with the proposed 14 performance or disposition thereof, which is untrue or misleading, and which is 15 known, or which by the exercise of reasonable care should be known, to be untrue or 16 misleading, or for any person, firm, or corporation to so make or disseminate or cause 17 to be so made or disseminated any such statement as part of a plan or scheme with the 18 intent not to sell that personal property or those services, professional or otherwise, so 19 advertised at the price stated therein, or as so advertised. 20 117. Through the acts and practices described herein, Defendants engaged in 21 a campaign of advertising and marketing to the public, including Plaintiff and Class 22 members. 23 118. Through Defendants’ advertising, marketing, publications, other 24 promotional materials and representations, Defendant caused to be made or 25 disseminated throughout California and elsewhere statements that were untrue or misleading with the intent to induce consumers like Plaintiff and Class members to 26 become Independent Fashion Retailers and purchase inventory from Defendants that 27 they otherwise would not have purchased, among other things. 28

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1 119. Defendants made and disseminated this advertising, including the untrue 2 and misleading statements, with the intent of inducing the public to become 3 Independent Fashion Retailers, enter the illegal pyramid scheme and purchase 4 inventory from Defendant. 5 120. In making and disseminating such statements, including advertising, 6 marketing and other promotional materials, Defendants knew or by the exercise of 7 reasonable care should have known, the statements were untrue or misleading. 121. Defendants violated Bus. & Prof. Code § 17500 because the 8 misrepresentations and omissions of material fact set forth in this Complaint were 9 material and likely to deceive a reasonable consumer. 10 122. As a direct and proximate result of Defendants’ false and misleading 11 advertising, Plaintiff and the Class members have lost money or property and 12 suffered damages in that they bought inventory they otherwise would not have 13 bought, paid more for inventory than they otherwise would have, or paid money to 14 became Independent Fashion Retailers when they otherwise would not have, among 15 other things. Plaintiff further alleges that as a direct and proximate result of 16 Defendants’ false and misleading advertising as alleged herein, Defendants have 17 obtained a monetary benefit from Plaintiff and the Class members. As such, 18 Defendants have been unjustly enriched at the expense of Plaintiff and the Class 19 members. 20 123. Plaintiff, individually and on behalf of the other Class members, 21 requests that this Court enter such orders and judgments as may be necessary to 22 enjoin Defendants from continuing their unfair, unlawful, and/or deceptive practices 23 and to restore to Plaintiff and other Class members any money Defendants acquired 24 by its improper conduct, including restitution and/or restitutionary disgorgement, and 25 for such other relief set forth below or as the Court deems proper. PRAYER FOR RELIEF 26 27 28

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1 WHEREFORE, Plaintiff, on behalf of herself and all persons similarly situated, 2 prays for judgment against Defendants, and each of them, as follows, as appropriate 3 4 for the particular count: 5 1. That the Court enter an order certifying the Class, appointing Plaintiff as 6 representative of the Class, and appointing Plaintiff’s counsel as Class 7 8 counsel; 9 2. That the Court enter judgment against Defendants for each of the causes 10 of action alleged herein; 11 12 3. That the Court enter an order temporarily and permanently enjoining

13 Defendants from continuing the acts of unfair competition or violations 14 of law as alleged herein; 15 16 4. For an order requiring the payment of restitution or restitutionary

17 disgorgement of all amounts obtained by Defendants as a result of the 18 misconduct set forth above in an amount according to proof at trial; 19 20 5. Recovery of all consideration paid pursuant to the scheme, less any

21 amounts paid or consideration provided to the participant(s) and 22 rescission of the contracts upon which Defendants’ endless scheme is 23 24 based;

25 6. For damages or other equitable monetary relief, plus pre and post- 26 judgment interest thereon, in an amount according to proof at trial; 27 28 7. For other appropriate equitable relief;

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1 8. For reasonable attorneys’ fees and costs as permitted by law including 2 under California Code Civil Procedure § 1021.5; and 3 4 9. For such other and further relief as may be appropriate. 5 JURY TRIAL DEMAND 6 Plaintiff hereby demands a jury trial for all claims and issues so triable. 7 8 Respectfully submitted, 9 LAW OFFICES OF ALEXANDER SCHACK 10 Dated: November 9, 2017 11 12 By: /s/ Natasha N. Serino Natasha N. Serino, Esq. 13 14 Alexander M. Schack, Natasha N. Serino 15 16870 West Bernardo Drive, Suite 400 San Diego, California 92127 16 Telephone: (858) 485-6535 17 Facsimile: (858) 485-0608 [email protected] 18 [email protected] 19 20 21 22 23 24 25 26 27 28

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